Top Goldman Quant: Quant Trading Is Dead

Many of the traditional quant strategies do not
work anymore, the top quant at Goldman Sachs told a conference in
Paris today.

"You have to adapt your process," Robert Litterman, managing
director and head of quantitative resources for Goldman Sachs
Asset Management, said at the Quant Invest 2009 conference,
according to Reuters. "What we're going to have to do to be
successful is to be more dynamic and more opportunistic and focus
especially on more proprietary forecasting signals ... and
exploit shorter-term opportunistic and event-driven types of
phenomenon."

Computer-driven hedge funds must hunt for new areas to exploit as
some areas of making money have become so overcrowded they may no
longer be profitable, according to Goldman Sachs Asset
Management. Robert Litterman, managing director and head of
quantitative resources, said strategies such as those which focus
on price rises in cheaply-valued stocks, which latch onto market
momentum or which trade currencies, had become very
crowded.

Instead he said opportunities could come in areas such as
event-driven strategies -- which focus on special events such as
mergers or restructuring -- and catastrophe reinsurance, although
he added they can just as quickly disappear.

He also pointed to credit, emerging markets, volatility trading
and commodities.

This seems to be fallout from the great quant bloodbath of 2007,
when it was first discovered that too many quant funds were
following the same quant strategies.

"We're putting together data that's not machine-readable, finding
databases that haven't been explored nearly as well as others,
identifying linkages across companies and industries and finding
patterns in the data that are not as well known," Reuters reports
Litterman saying.